I’m a CPA. The question I hear most about reverse mortgages isn’t about rates. It’s “What happens to my kids?”
That fear can keep homeowners 62 and older from ever looking, because they assume their children will lose the house or inherit a debt. The real rules are more specific than that, and for many families, less scary.
Want numbers for your own home? See what a reverse mortgage could look like for you with a free quote.
When the loan comes due
With a home equity conversion mortgage (HECM), the most common type of reverse mortgage, you don’t make monthly mortgage payments. The loan comes due when the last borrower dies, sells the home or moves out for more than 12 months in a row.
It can also come due if property taxes, homeowners insurance or upkeep aren’t kept up, so those costs stay yours for as long as you live there.
When the loan comes due, the lender contacts the estate. Heirs generally have 30 days to say what they plan to do and up to six months to do it, with possible extensions of up to a year in total while they’re actively selling or refinancing.
Your heirs’ three choices
Keep the house. Heirs can pay off the loan, usually by refinancing or using other money. If the balance is higher than the home’s value, they can keep it by paying 95% of the current appraised value.
Sell the house. The loan is paid from the sale. Any equity left over belongs to the heirs.
Hand back the keys. If the home is worth less than the loan, heirs can give the property to the lender through a deed in lieu of foreclosure and walk away.
The rule that matters most to your children: a HECM is a non-recourse loan. Your heirs will never owe more than the home is worth, and the debt doesn’t pass to them personally.
If you’d like to see how much equity you could use and what would be left, request a free, no-obligation quote. A licensed specialist follows up by phone to explain costs, repayment and what it means for your heirs.
What a reverse mortgage does cost your heirs
Non-recourse doesn’t mean free. The balance grows every month as interest and mortgage insurance premiums are added, and upfront costs can include an origination fee, closing costs and an initial mortgage insurance premium.
The longer the loan runs, the less equity is likely to be left. On a home worth $400,000, that can be the difference between leaving a six-figure inheritance and leaving very little.
That trade-off can still make sense. Using equity to delay Social Security, cover home care or avoid selling investments in a down market can leave a family better off overall. But it should be a decision your heirs understand, not one they discover.
Comparing your options? See your reverse mortgage numbers before you decide.
Before you sign: what to settle with your family
Who’s on the loan. A spouse who isn’t a borrower, often because they were under 62, may be able to stay in the home after you die if certain conditions are met. Know the rules before you close, not after.
The counseling session. Every HECM borrower must complete a counseling session with an independent, HUD-approved counselor before closing. Invite your adult children. It’s the easiest way to make sure everyone hears the same facts.
Where the paperwork is. Heirs have tight deadlines. Tell them who the servicer is and where the documents are kept.
The alternatives. A HELOC, downsizing or selling and renting can be better fits for some families. A good specialist will walk through them with you.
Get the facts for your home, not a brochure. Longbridge Financial offers a free reverse mortgage quote for homeowners 62 and older. The form is short (about two minutes), and a licensed specialist will call to explain the costs, how repayment works and what your heirs can expect. There’s no obligation.
Get your free reverse mortgage quote
The bottom line
The house you spent 30 years paying off is often the biggest asset your family has. Families who use it well have one thing in common: everyone knows the plan before the loan comes due. Your heirs can keep the home, sell it or walk away, and they’ll never owe more than it’s worth. Get the numbers, then have the conversation.
Free quote, no obligation. A short form, then a call from a licensed specialist. See your reverse mortgage options
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